With Massive Buyouts, GM Takes Step Toward Recovery

With yesterday's announced of a massive buyout plan, General Motors has taken a big step on the road to recovery that also diminishes the likelihood of a crippling strike against its bankrupt former parts unit Delphi Corp. More than 47,600 production workers at GM and Delphi agreed to retire or quit for pensions or cash, in the largest buyout plan in U.S. industrial history, company officials announced June 27.

Richard Wagoner, GM's chairman and CEO, said he believed the deal would help lead to a settlement of the thorny impasse at Delphi, an auto parts operation that was part of GM until 1999. "If you consider the number of people retiring, it goes a long way toward addressing the issue of a future for Delphi that kind of works for everybody," Wagoner said while announcing that 35,000 people, or more than a third of the company's current U.S. workforce, have agreed to quit or retire by January 1.

"(Delphi) can be a competitive business. It's fair to the people who have been employed at Delphi. It enables us to source from Delphi on a cost competitive basis. All that is facilitated by having an answer to the question of what's going to happen to the people involved," Wagoner said.

Delphi filed for bankruptcy in October, claiming it could no longer afford the expensive labor contracts modeled after those negotiated by GM and the United Auto Workers. But GM still bears some financial obligations to Delphi, including pension costs. Robert Miller, Delphi's chairman and chief executive officer, has said repeatedly that Delphi's prevailing wages of $27 per hour are no longer competitive and needed to be reduced. But Delphi's principal unions have balked at wholesale wage cuts and threatened to strike if Delphi succeeded in getting the bankruptcy court to alter the terms of the existing contracts.

Delphi said 12,600 -- or just more than half of its 24,000 union-represented employees -- have elected one of the retirement options available under the plan. Another 5,000 employees are eligible to transfer back to GM, which had hired them prior to the Delphi spinoff.

Merrill Lynch analyst John Murphy said the acceptance rate for the buyouts was surprisingly high, providing significant relief to the struggling auto giant.

Copyright Agence France-Presse, 2006

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